Closing Market Summary: Cyclical Sectors Lead Stocks Lower
The S&P 500 settled lower by 0.3% as equities saw a continuation of yesterday's selling. The benchmark index opened the session in negative territory as a cautious trade in Europe contributed to the early losses. However, an afternoon bid lifted indices off their lows, leading to just a modest decline. Several reports attributed the notable weakness in Europe to participants reducing their risk exposure in anticipation of Friday's U.S. nonfarm payrollsreport. Although the Federal Reserve has made it clear the strength of thelabor market will play a large part in its tapering decision, the decision will also have to factor in the 2.0% inflation target, which remains elusive.Both PCE and core PCE prices hover near 1.0%. The opening losses were followed by a rebound, but only the Nasdaq was able to make a short-lived appearance in positive territory, seeing help from its largest component, Apple (AAPL 566.32, +15.09). The largest tech stock jumped 2.7% following news China Mobile (CHL 53.75, +0.13) began accepting iPhone pre-orders. Another Nasdaq member, Tesla (TSLA 144.70, +20.53), also displayedstrength, surging 16.5% after Morgan Stanley named the stock its ‘Top Pick.'
U.S. stocks tumbled to fresh lows two hours after the opening bell as their European counterparts weakened into the close. The selling pressured five of ten sectors while consumer staples (+0.5%), energy (+0.3%), technology (+0.4%), telecom services (+0.2%), and utilities (+0.6%) escaped with modest gains. Notably, the energy sector advanced as crude oil futures (+$2.32 to $96.14/bbl) shot up on news OPEC might curb output in 2014 to ensure oil prices stay near $100/bbl. On the downside, the materials (-1.2%) sector finished behind the remaining groups. Steel stocks were mixed, but the largest steelmaker, ArcelorMittal (MT 16.89, -0.40), underperformed with a loss of 2.3%. Miners also weighed as the Market Vectors Gold Miners ETF (GDX 20.57, -0.33) lost 1.6%. Also of note, Rio Tinto (RIO 52.38, +0.01) announced plans to cut its capital spending in half by 2015; however, the reaction was muted. Other cyclical sectors did not fare much better as consumer discretionary, financials, and industrials lost between 0.7% and 0.9%. Elsewhere, health care (-0.8%) was the only laggard among countercyclical groups as biotechnology weighed. The iShares Nasdaq Biotechnology ETF (IBB 220.66, -4.07) lost 1.8%.
Today's weakness caused the CBOE Volatility Index (VIX 14.55, +0.32) to end at a seven-week high after being trapped between 11.99% and 14.36% since October 17. Treasuries ended modestly higher with the 10-yr yield down two basis points at2.78%. Trading volume was just above average as 770 million shares changed hands on the floor of the NYSE. There was no economic data of note released today. Tomorrow, the weekly MBA Mortgage Index will be reported at 7:00 ET and November ADP Employment Change will cross the wires at 8:15 ET. The October trade balance will be released at 8:30 ET while new home sales for September and October will be announced at 10:00 ET. Also at 10:00 ET, investors will receive the ISM Services Index for November. The busy day of data will be topped off with the 14:00 ET release of the Federal Reserve's December Beige Book.
o Nasdaq +33.7% o Russell 2000 +32.3% o S&P 500 +25.9% o DJIA +21.5%